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Jayanta Mallick

Kolkata , Nov. 27

WHO owns controlling stake in Maharashtra Scooters Ltd (MSL)? Going by a recent offer letter of Bajaj Electricals, one gets the impression that Bajaj holds 51 per cent or the controlling stake in MSL.

Bajaj Electricals, in its recent rights issue offer letter, ostensibly to show its strong parentage and group holding spread, stated that "the shares held by the promoters (Bajaj)" in MSL amounted to 58,28,560, which translates into a 51 per cent stake in the company.

The issuer, as a matter of routine, also undertook the responsibility in stating that all the information in the prospectus was true and not misleading.

However, according to available information, MSL, is a joint ventutre between Western Maharashtra Development Corporation (WMDC), a Government of Maharashtra outfit, and Bajaj Auto. While Bajaj Auto holds 24 per cent in MSL, WMDC's stake is 27 per cent.

The Maharashtra Government, for nearly a year now, is engaged in a process of disinvestment in the joint venture as per the joint venture agreement. The agreement gives Bajaj first right of refusal.

After a dispute over the price of the WMDC's holding in MSL, the joint venture partners have now initiated arbitration proceedings to sort out the problem.

When enquired, Mr Vimal Bhutani, head of the equity origination of SBI Capital Markets Ltd, the lead manager to the rights issue, while refusing to comment said "the confidentiality agreement with our client (Bajaj Electricals) prevents us from saying anything on the subject".

According to SEBI sources, the alleged mis-statement in the offer letter of Bajaj Electricals has been pointed out to the market regulator by the lead manager to the issue after the offer was closed. An inquiry is likely on the matter soon.

In the past, SEBI has also taken up some cases suo motu and meted out punishments to the corporates concerned or the lead manager.

Mr Prithvi Haldea, Managing Director of Prime Database, who is also on the SEBI advisory committee on the primary market, when contacted, said that any disclosure in any offer document, which misleads investors in a substantive manner, requires suitable action by the regulators.

"This is all the more important as investors make their decisions to participate in an issue based solely on the disclosures," he added.

According to him, SEBI normally relies on the due diligence exercise undertaken by the lead managers, and the lead managers on their part rely on the information furnished by the company.

The market regulator is now attempting to codify the definitions and disclosure procedures, accordingly fix accountability in a comprehensive manner.

Mr Haldea said all the relevant issues have been raised by him and SEBI was in the process of taking a view on disclosures by corporates and plugging of loopholes.

"The advisory committee is looking into the possibility of re-defining a `promoter' and disclosures pertaining to its holdings," he observed.

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